Delegation by Trustees

1. The modern law of delegation permits a trustee to delegate duties and powers that a prudent trustee of comparable skills could properly delegate, subject to the trustee's continuing duty of care in the selection, instruction, and supervision of agents. UTC § 807; UPIA § 9; Restatement (Third) of Trusts § 80.
2. Delegation is a doctrinally reasoned departure from the historical nondelegation rule; it is not a general license to transfer fiduciary responsibility to others. Fiduciary responsibility remains with the trustee.
3. The trustee's duty of care in delegation has three doctrinal components: prudent selection of the agent, reasonable establishment of the scope and terms of the delegation, and periodic monitoring of the agent's performance. UTC § 807(a)(1)–(3).
4. Certain functions are inherently non-delegable because they are constitutive of the fiduciary office itself: the exercise of the trustee's own discretion, the ultimate responsibility for administration, and the duties of loyalty and impartiality.
5. Investment delegation to a qualified investment manager is expressly authorized by the Uniform Prudent Investor Act and by UTC § 807, and, in appropriate cases, may be required rather than merely permitted.
6. Administrative and ministerial delegation — to attorneys, accountants, custodians, property managers, and other agents — is a routine incident of prudent trust administration.
7. A trustee who complies with the standard of care in selection, instruction, and supervision is not liable for the acts or omissions of the agent. UTC § 807(c).
8. Reliance on professional advisors is a species of delegation and is measured by the reasonableness of the reliance in light of the trustee's own competence, the advisor's qualifications, and the character of the matter delegated.
9. Co-trustees may allocate functions among themselves consistently with the terms of the trust and with the applicable statute; such allocations do not relieve the non-acting co-trustees of the duty to prevent breaches. UTC §§ 703, 807(d).
10. Judicial review of delegation is conducted at the time of the delegation and on the record then available; the trustee is not judged by hindsight, but by the reasonableness of the selection, instruction, and supervision.

Upon completing this chapter, the reader should be able to:

1. State the doctrinal content of the modern law of trustee delegation under UTC § 807, UPIA § 9, and Restatement (Third) of Trusts § 80.
2. Explain the historical transition from the nondelegation rule to prudent delegation, and the reasons for the transition.
3. Distinguish delegable from non-delegable duties, and identify the functions that must be performed personally by the trustee.
4. Apply the three-part duty of care — selection, instruction, and supervision — to a proposed or executed delegation.
5. Draft a written delegation instrument that satisfies the requirements of UTC § 807 and UPIA § 9.
6. Analyze investment delegation to a qualified investment manager, including the trustee's continuing duties of monitoring and review.
7. Evaluate the reasonableness of a trustee's reliance on an attorney, accountant, custodian, or property manager.
8. Assess the allocation of functions among co-trustees and the residual duty of each co-trustee to prevent breaches.
9. Diagnose common misconceptions about delegation, including the belief that delegation transfers fiduciary responsibility.
10. Prepare and evaluate the record required to demonstrate — or to challenge — the prudence of a delegation.

• Uniform Trust Code § 807 (delegation by trustee); § 703 (cotrustees); § 804 (prudent administration); § 806 (trustee's skills); § 1001 (remedies for breach); § 1008 (exculpation).
• Restatement (Third) of Trusts §§ 80 (delegation), 77 (standard of care), 78 (duty of loyalty), 90 (prudent investor rule).
• Restatement (Second) of Trusts §§ 171 (duty not to delegate), 184 (co-trustees), 224 (liability among co-trustees).
• Uniform Prudent Investor Act §§ 9 (delegation of investment and management functions), 2 (standard of care).
• Leading state trust statutes implementing UTC § 807: Cal. Prob. Code §§ 16052, 16401; Fla. Stat. § 736.0807; N.Y. Est. Powers & Trusts Law § 11-2.3(c); Tex. Prop. Code § 117.011; Ohio Rev. Code § 5808.07; Va. Code § 64.2-768.
• Landmark decisions: Shear v. Gabovitch, 685 N.E.2d 1168 (Mass. App. Ct. 1997); In re Estate of Rothko, 43 N.Y.2d 305 (1977); Stark v. United States Trust Co., 445 F. Supp. 670 (S.D.N.Y. 1978); Speight v. Gaunt, 9 App. Cas. 1 (H.L. 1883); Learoyd v. Whiteley, 12 App. Cas. 727 (H.L. 1887).

• Austin Wakeman Scott, William Franklin Fratcher & Mark L. Ascher, Scott and Ascher on Trusts (5th ed.) §§ 17.7, 19.3 (delegation).
• George Gleason Bogert, George Taylor Bogert & Amy Morris Hess, The Law of Trusts and Trustees (3d ed. & Supp.) §§ 555–557 (trustee's power to delegate).
• Charles E. Rounds Jr. & Charles E. Rounds III, Loring and Rounds: A Trustee's Handbook (current ed.), ch. 6 (delegation and reliance).
• Robert H. Sitkoff & Jesse Dukeminier, Wills, Trusts, and Estates (11th ed.), chapters on trust administration and prudent investment.
• John H. Langbein, Reversing the Nondelegation Rule of Trust-Investment Law, 59 Mo. L. Rev. 105 (1994).
• John H. Langbein, The Uniform Prudent Investor Act and the Future of Trust Investing, 81 Iowa L. Rev. 641 (1996).
• Restatement (Third) of Trusts, Reporter's Notes to §§ 80 and 90.
• ACTEC Commentaries on Delegation and the Prudent Investor Rule (current edition).

Delegation is the act by which the trustee authorizes another to perform functions that would otherwise be discharged by the trustee. In modern trust law, delegation is a routine and often necessary feature of prudent fiduciary administration. Few trustees, however competent, possess the full range of skills required to administer a modern trust — investment management, tax preparation, real-estate operation, custody of securities, legal advice — and no trustee is required to attempt what a prudent person would rationally commit to a qualified agent. UTC § 807; Restatement (Third) of Trusts § 80.

The doctrinal permission to delegate is, however, always accompanied by the retention of fiduciary responsibility. Delegation transfers the performance of a function; it does not transfer the office. The trustee remains bound by the duties of loyalty, impartiality, prudent administration, and the standard of care, and remains accountable to the beneficiaries for the proper discharge of the office as a whole. The law of delegation is best understood as a set of rules governing how a trustee may enlist assistance without abdicating the office.

Delegation must be distinguished from arrangements in which the settlor allocates fiduciary functions to persons other than the trustee ab initio. In a directed trust, the trust instrument names a person — a trust director, investment adviser, or distribution adviser — who holds decisional authority over specified matters. The trustee's role with respect to those matters is limited by the terms of the trust and, in Uniform Directed Trust Act jurisdictions, by statute. In a trust-protector arrangement, a designated protector holds specified powers, often including the power to remove and replace the trustee.

These arrangements are structural allocations of authority effected by the settlor; delegation, by contrast, is a decision by the trustee, taken in the course of administration, to authorize an agent to perform a function that the trustee would otherwise perform. The doctrinal rules governing delegation — prudent selection, instruction, and supervision — apply to the trustee's own decisions. They do not, without more, apply to the settlor's structural allocations, which are governed by their own bodies of law.

The classical rule of English equity was that a trustee could not delegate the exercise of the trustee's discretion. The rule was captured in the maxim delegatus non potest delegare — one to whom authority is delegated may not further delegate. The rule reflected the personal character of the fiduciary office: the settlor was understood to have selected the trustee for the trustee's own judgment, skill, and integrity, and the delegation of that judgment to another would frustrate the settlor's choice. Speight v. Gaunt, 9 App. Cas. 1 (H.L. 1883); Learoyd v. Whiteley, 12 App. Cas. 727 (H.L. 1887).

The American Restatement (Second) of Trusts § 171 (1959) codified the rule in narrow but firm terms: the trustee is under a duty to the beneficiary not to delegate to others the doing of acts which the trustee can reasonably be required personally to perform. The Restatement (Second) permitted delegation only where the act was of a ministerial or mechanical character, or where prudent business practice required it. The exercise of discretion — the selection of investments, the making of distributions, the determination of trust policy — was reserved to the trustee personally.

The nondelegation rule became increasingly untenable in the twentieth century as trust portfolios diversified and as modern portfolio theory made specialized investment management not merely permissible but ordinarily prudent. The classical rule required the trustee personally to make investment decisions that competent professionals had come to make far better than any lay trustee could. The tension between the classical rule and the standard of prudent administration was resolved, in the mature American law, in favor of prudent delegation.

The transition was accomplished doctrinally in three principal steps. First, the Restatement (Third) of Trusts § 80 (2007) recognized a general power of the trustee to delegate functions that a prudent trustee of comparable skills could properly delegate. Second, the Uniform Prudent Investor Act § 9 (1994) expressly authorized the delegation of investment and management functions, subject to the standard of care in selection, instruction, and monitoring. Third, the Uniform Trust Code § 807 (2000) codified the modern rule in comprehensive form, extending prudent delegation to all functions and providing that the trustee is not liable for the agent's actions where the trustee has complied with the standard of care. John H. Langbein, Reversing the Nondelegation Rule of Trust-Investment Law, 59 Mo. L. Rev. 105 (1994).

The modern law of delegation rests on two doctrinal propositions. The first is that the trustee's duty is to administer the trust prudently, and that prudent administration may require the use of specialized expertise that the trustee does not personally possess. The second is that the fiduciary character of the trustee's office is preserved by the trustee's continuing duty of care in the selection, instruction, and supervision of agents, and by the trustee's continuing accountability for the proper discharge of the office as a whole.

The result is a law of delegation that facilitates modern trust administration while preserving the fiduciary character of the office. The trustee is neither compelled to attempt tasks beyond the trustee's competence, nor permitted to abdicate the office by referring all matters to agents. The trustee's obligation is to bring prudent judgment to the decision whether to delegate, to the selection of the agent, to the instruction of the agent, and to the ongoing supervision of the agent's performance.

Under UTC § 807(a), the trustee may delegate duties and powers that a prudent trustee of comparable skills could properly delegate under the circumstances. The test is functional and comparative: the question is not whether the function is inherently delegable, but whether a prudent trustee of comparable skills, considering the character of the function, the qualifications of available agents, and the circumstances of the particular trust, would properly delegate it. Restatement (Third) of Trusts § 80 states the rule in substantially identical terms.

The test displaces the categorical distinctions of the older law between discretionary and ministerial acts. Under the modern rule, even functions that involve the exercise of judgment — the selection of investments, the management of real estate, the preparation of tax returns — may be delegated where a prudent trustee of comparable skills would properly do so. The categorical distinction survives, however, at the core of the fiduciary office: the trustee's own ultimate decisional authority, and the duties of loyalty and impartiality, remain non-delegable.

Certain functions cannot be delegated because they are constitutive of the fiduciary office itself. The trustee cannot delegate the ultimate decisional authority reserved by the trust instrument or by law to the trustee — the authority to approve or reject the agent's recommendations, to determine the general policy of the trust, and to answer to the beneficiaries and the court for the administration as a whole. The duties of loyalty and impartiality cannot be delegated, because they define the character in which the trustee acts.

• The exercise of the trustee's own discretion in matters expressly reserved to the trustee.
• The ultimate decision to accept or reject an agent's recommendation.
• The duty of loyalty and the duty of impartiality, considered as duties owed by the trustee.
• The duty to keep and render accounts to the beneficiaries and to the court.
• The duty to respond to beneficiary inquiries and to provide information required by UTC § 813.
• Functions that the trust instrument expressly requires the trustee personally to perform.

The functions that are, in practice, most commonly delegated fall into two broad categories. The first is administrative: custody of securities, bookkeeping, tax preparation, legal analysis, property management, valuation of illiquid assets, and similar functions. The second is investment: the management of the trust portfolio in accordance with the trustee's investment policy, whether through a registered investment adviser, a bank trust department, or a private investment manager.

The delegation of these functions is ordinarily permitted, and, in the case of specialized functions that the trustee does not competently perform, may be required by the standard of care. A trustee who lacks investment expertise and who fails to delegate to a qualified investment manager may commit a breach not by delegating, but by failing to delegate a function that a prudent trustee of comparable skills would delegate.

Investment delegation is the paradigmatic case of modern prudent delegation. Under UPIA § 9 and UTC § 807, a trustee may delegate investment and management functions to a qualified investment manager, subject to the standard of care in selection, instruction, and monitoring. The delegation ordinarily takes the form of a written investment management agreement that specifies the scope of the delegated authority, the investment policy of the trust, the reporting obligations of the manager, and the term and termination provisions.

The manager, upon accepting the delegation, owes duties to the trust and to the beneficiaries and is subject to the jurisdiction of the courts of the state in which the trust is administered. UPIA § 9(b); UTC § 807(b). By accepting the delegation, the manager submits to those duties as a matter of statutory rule; the manager may not contract out of them.

In appropriate cases, the duty of prudent administration requires the trustee to delegate investment functions rather than to perform them personally. A trustee who lacks the competence to manage a diversified portfolio in accordance with modern portfolio theory, and who fails to obtain qualified investment assistance, may commit a breach of the standard of care. The failure lies not in the absence of the trustee's personal competence — the trustee is not required to be a professional investor — but in the failure to enlist the assistance that a prudent trustee of comparable skills would enlist.

The duty is not absolute. A trustee whose competence is adequate to the trust's investment requirements, or whose trust is of a character that does not require specialized investment management, is not required to delegate. But where the character of the trust and the trustee's own limitations point toward delegation, the trustee's failure to delegate is itself subject to review under the standard of prudent administration.

The trustee's duties do not end with the appointment of the investment manager. The trustee must periodically review the manager's performance, compliance with the investment policy, and adherence to the terms of the delegation. UTC § 807(a)(3). Review is a matter of process rather than of outcome: the trustee is not required to second-guess the manager on individual investment decisions, but is required to ascertain that the manager is performing competently, prudently, and consistently with the trust's objectives.

Where the review discloses inadequate performance, imprudent conduct, or a failure to comply with the delegation, the trustee's duty is to correct the deficiency — by additional instruction, by supplementary review, or, where necessary, by termination and replacement of the manager. Continued reliance on a manager whose performance the trustee knows or should know to be deficient is itself a breach of the duty of care.

Ministerial acts — the routine, mechanical, or clerical operations of trust administration — have always been recognized as delegable. Record-keeping, the execution of standard documents, the collection of income, the payment of bills, and the safekeeping of physical assets are ordinarily performed by employees, agents, or service providers under the trustee's direction. The delegation of ministerial acts requires only reasonable selection and supervision, and does not raise the doctrinal concerns that formerly attended the delegation of discretion.

The character of an act as ministerial, however, must be assessed functionally. An act that appears mechanical — for example, the execution of a standard form — may involve embedded discretion if the trustee has not first determined that the form is appropriate for the transaction. The trustee's duty is to identify the discretionary component of any function before delegating its execution, and to reserve the discretionary component to the trustee's own decision.

The custody of trust securities is typically delegated to a bank or brokerage custodian, subject to a custody agreement that specifies the custodian's duties, the trustee's rights to information and instruction, and the allocation of responsibility for losses. Property management — the day-to-day operation of real estate, farms, or businesses held in trust — is ordinarily delegated to a professional manager or operating company, subject to a management agreement. Recordkeeping and accounting functions may be delegated to accountants, bookkeepers, or specialized service providers.

In each case, the trustee's duty of care applies to the selection of the agent, the establishment of the scope of the delegation, and the periodic review of the agent's performance. The trustee remains responsible for the accuracy and completeness of the trust's records, the safety of trust property, and the proper accounting of trust income and expenses.

The trustee's first duty in any delegation is the prudent selection of the agent. UTC § 807(a)(1). Selection requires the trustee to consider the character of the function, the qualifications required to perform it, and the reputation, competence, and integrity of the available candidates. For specialized functions — investment management, complex tax preparation, valuation of business interests — the trustee should consider licensure, professional credentials, disciplinary history, references, and, where appropriate, competing proposals.

The record of selection is central to any later review. A trustee who has documented the criteria applied, the candidates considered, the reasons for the selection, and the terms of the engagement will ordinarily be able to demonstrate compliance with the standard of care. A trustee who cannot reconstruct the selection process may be unable to demonstrate prudence, even where the agent selected has proved competent.

The trustee's second duty is to establish the scope and terms of the delegation consistently with the purposes and terms of the trust. UTC § 807(a)(2). The delegation should be reduced to writing whenever the character or duration of the engagement warrants; for investment delegation and other significant engagements, a written agreement is ordinarily required by prudent practice and, in many jurisdictions, by statute or regulation.

• The identity of the trustee and the agent.
• The functions delegated and, expressly, those not delegated.
• The applicable investment policy or operating standards.
• The agent's reporting obligations and their frequency.
• The trustee's rights to information, instruction, and inspection.
• The compensation of the agent and its allocation between principal and income.
• The term of the engagement and the terms on which it may be terminated.
• The applicable law and the forum for the resolution of disputes.

Effective delegation requires that the agent be informed of the matters the agent must know to perform the delegated function competently. The trustee must communicate the terms of the trust so far as they bear on the delegated function, the trustee's expectations regarding scope and standards of performance, and any information about the beneficiaries, the trust property, or the trust's circumstances that the agent needs in order to act consistently with the trust's purposes.

The duty to instruct is a continuing duty. Changes in the terms of the trust, in the composition of the trust property, in the circumstances of the beneficiaries, or in the trust's objectives may require corresponding instruction to the agent. The failure to inform an agent of a material change may cause the agent to act on stale premises, and any resulting loss may be attributable to the trustee's failure to instruct rather than to the agent's own conduct.

The trustee's third duty is to review the agent's performance periodically. UTC § 807(a)(3). The frequency and intensity of review depend on the character of the delegation, the nature of the function, and the trust's circumstances. For active investment delegation, review is typically quarterly or semi-annually and includes performance measurement, compliance verification, and evaluation of the manager's continuing suitability. For less active engagements — a custody arrangement, a tax preparer, a property manager — review may be annual or event-driven.

Review is a duty of process. The trustee is not required to duplicate the agent's work or to substitute the trustee's own judgment for the agent's on matters within the delegation. The trustee is required to obtain sufficient information to determine that the agent is performing competently, that the agent's actions remain consistent with the terms of the delegation, and that the delegation continues to serve the trust's purposes.

Trustees routinely consult attorneys on questions of trust construction, tax law, the propriety of proposed distributions, and the conduct of litigation. Reliance on legal advice is a species of delegation and is measured by the reasonableness of the reliance. Reasonable reliance requires that the trustee select competent counsel, provide counsel with the facts necessary to render sound advice, and fairly consider the advice received. The trustee is not required to be an independent lawyer, but is required to be an intelligent client.

Reliance is not a defense where the advice sought was itself the product of a conflict of interest, where the trustee should have recognized that the advice was plainly wrong, or where the trustee employed counsel principally to insulate the trustee from the consequences of a decision the trustee had already made. The reasonable-reliance doctrine protects the trustee who consults counsel in good faith; it does not protect the trustee who uses counsel as a shield.

Accountants and tax advisors are ordinarily engaged to prepare fiduciary income tax returns, to prepare accountings, and to advise on the tax consequences of proposed transactions. As with legal advice, the reasonableness of reliance is measured by the qualifications of the advisor, the completeness of the information the trustee provided, and the character of the advice received.

A trustee who has retained a qualified accountant to prepare returns and accountings ordinarily satisfies the duty of care with respect to those functions, provided the trustee has reviewed the returns and accountings before filing and has taken reasonable steps to satisfy the trustee that they are complete and accurate. The trustee's review is not a duty to reperform the accountant's work; it is a duty to bring intelligent attention to the product.

Custodians hold trust securities and other property for safekeeping and effect transactions on the trustee's instruction. Property managers operate real estate and other operating assets on behalf of the trust. In each case, the trustee's reliance on the custodian or manager is governed by the ordinary rules of delegation: prudent selection, clear scope and terms, and periodic review.

Where custody or management arrangements involve significant discretion — for example, a property manager authorized to enter leases, undertake capital expenditures, or negotiate service contracts — the delegation must specify the limits of the manager's discretion and the matters reserved to the trustee. A delegation without such limits places the trustee at risk of imputed responsibility for decisions the trustee never approved.

Where a trust has multiple trustees, the trust instrument or the applicable statute may permit or require the allocation of functions among them. UTC § 703(a) provides that cotrustees who are unable to reach a unanimous decision may act by majority decision, and § 703(e) permits a cotrustee to delegate to another cotrustee the performance of a function other than a function that the trust expressly requires all cotrustees to perform jointly. Restatement (Third) of Trusts § 81.

Allocation among co-trustees is not the doctrinal equivalent of delegation to an outside agent. A co-trustee to whom a function is allocated remains a trustee and owes the full range of fiduciary duties directly to the beneficiaries. The allocation regulates the internal organization of the fiduciary office; it does not create an agency relationship between co-trustees.

Even where functions have been allocated to a particular co-trustee, each co-trustee retains a residual duty to take reasonable steps to prevent breaches by the others. UTC § 703(g); Restatement (Third) of Trusts § 81. A co-trustee who learns of a proposed or actual breach by another cotrustee must take reasonable steps to compel that cotrustee to redress the breach, to inform the beneficiaries, and, where necessary, to seek instructions or protective orders from the court.

The residual duty prevents the allocation of functions from becoming a device for evasion of fiduciary responsibility. A cotrustee cannot avoid responsibility for a breach by pointing to the allocation of the relevant function to another cotrustee, if the cotrustee knew or should have known of the breach and failed to take reasonable steps to prevent or redress it.

Under UTC § 807(c), a trustee who complies with the standard of care in selecting an agent, establishing the scope and terms of the delegation, and periodically reviewing the agent's performance is not liable to the beneficiaries or to the trust for an action of the agent to whom the function was delegated. The statute reflects the modern doctrinal position: fiduciary responsibility remains with the trustee, but liability for the agent's independent misconduct does not attach to the trustee where the trustee has met the standard of care in the delegation itself.

Conversely, where the trustee has failed to meet the standard of care — where the agent was imprudently selected, where the scope of the delegation was inadequately defined, or where the trustee failed to supervise the agent's performance — the trustee is liable to the beneficiaries for the losses that a prudent delegation would have avoided. The measure of liability is the difference between the trust's actual position and the position it would have occupied had the trustee properly delegated.

Judicial review of a trustee's delegation is conducted at the time of the delegation and on the record then available. The court asks whether a prudent trustee of comparable skills, considering the character of the function, the qualifications of the agent, and the circumstances of the trust, would have delegated the function on the terms adopted; whether the trustee's selection was reasonable; whether the scope and terms of the delegation were adequately defined; and whether the trustee's supervision was reasonable throughout the term of the engagement.

Hindsight is not the measure. The fact that the agent proved incompetent, dishonest, or unfortunate does not, by itself, establish a breach of the trustee's duty in the delegation. The question is whether the trustee's decisions at the time of delegation, instruction, and review met the standard of care. In re Estate of Rothko, 43 N.Y.2d 305 (1977) illustrates the point: liability was imposed not because the executors had engaged professional dealers, but because they had done so in circumstances that any prudent fiduciary would have recognized as compromised by self-dealing and imprudence.

Beneficiaries may challenge a trustee's delegation in the ordinary course of accounting proceedings, by petition for instructions, or by action for breach of trust. Available remedies include surcharge for losses attributable to the trustee's breach, disgorgement of any benefit received by the trustee in connection with the improper delegation, adjustment of the trustee's compensation, and, in serious cases, removal of the trustee. UTC § 1001; Restatement (Third) of Trusts § 100.

Where the improper delegation resulted in a benefit to a third party in circumstances involving disloyalty or self-dealing — for example, delegation to a family member, to an affiliate, or to a professional in whom the trustee held an undisclosed interest — the beneficiaries may pursue the third party under the ordinary rules of participation in a breach of trust. UTC § 1012.

The trustee retains at all times the authority to revoke or modify a delegation. UTC § 807(a); UPIA § 9(a). The retained authority is essential to the trustee's continuing fiduciary responsibility: the trustee cannot fulfill the duty of supervision without the practical ability to correct or terminate an agent whose performance is inadequate.

The delegation agreement should preserve the trustee's authority in operative terms — the ability to terminate on reasonable notice, to instruct the agent, and to obtain the trust's records upon termination. A delegation that purports to bind the trustee irrevocably, or that erects practical obstacles to termination, is inconsistent with the standard of care and is unenforceable to the extent it impairs the trustee's supervisory authority.

Several misconceptions recur in practice. The first is that delegation transfers fiduciary responsibility to the agent. It does not. The trustee remains the fiduciary; the agent, however competent, does not stand in the trustee's place before the beneficiaries. The trustee's engagement of an agent modifies the trustee's mode of performance; it does not modify the trustee's office.

• Delegation transfers fiduciary responsibility. False: the trustee retains the office and its duties.
• A trustee who lacks expertise is entitled to rely on any professional. False: the trustee must select prudently, instruct clearly, and supervise periodically.
• Reliance on counsel or accountants is an absolute defense. False: reliance is a defense only when reasonable under the circumstances.
• Delegation to a corporate custodian eliminates the trustee's duty of supervision. False: the trustee remains obligated to monitor performance and to correct deficiencies.
• The failure to delegate is always safe. False: in appropriate cases, the failure to delegate is itself a breach of the duty of prudent administration.
• Written delegation is optional even for significant engagements. False: prudent practice requires written delegation for investment management, custody, property management, and other significant engagements.

Settlors who wish to authorize, direct, or restrict delegation should address the matter expressly in the trust instrument. Where the settlor wishes to permit broad delegation, the instrument should confirm the trustee's authority under UTC § 807 and UPIA § 9. Where the settlor wishes to require delegation in specified areas — for example, professional investment management — the instrument should so provide. Where the settlor wishes to prohibit delegation of specified functions, the prohibition should be clear and its consequences understood.

Trustees, for their part, should establish delegation policies that identify the functions ordinarily delegated, the standards for selection of agents, the scope-and-terms provisions typically required, and the intervals and content of periodic review. The existence of a written delegation policy, applied consistently across the trustee's engagements, is significant evidence of prudent administration and provides a template for the demonstration of compliance in any future proceeding.

The prudence of a delegation is demonstrated, in litigation and in accounting proceedings, principally by the record. The record should include the criteria applied in the selection of the agent; the candidates considered and the reasons for the selection made; the written delegation agreement; the trustee's communications with the agent, particularly instructions and responses to significant events; the periodic reports received from the agent; the trustee's reviews of those reports; and any changes made to the terms of the delegation.

The record is not a formality. It is the medium through which the trustee's compliance with the standard of care becomes visible to beneficiaries, courts, and successor trustees. A trustee who has delegated prudently but has failed to preserve the record may be unable, years later, to demonstrate that the delegation met the standard of care. Prudent administration and prudent record-keeping are, in this respect, inseparable.

• Austin Wakeman Scott, William Franklin Fratcher & Mark L. Ascher, Scott and Ascher on Trusts (5th ed.) §§ 17.7, 19.3.
• George Gleason Bogert, George Taylor Bogert & Amy Morris Hess, The Law of Trusts and Trustees (3d ed. & Supp.) §§ 555–557.
• Charles E. Rounds Jr. & Charles E. Rounds III, Loring and Rounds: A Trustee's Handbook (current ed.), ch. 6.
• Robert H. Sitkoff & Jesse Dukeminier, Wills, Trusts, and Estates (11th ed.).
• John H. Langbein, Reversing the Nondelegation Rule of Trust-Investment Law, 59 Mo. L. Rev. 105 (1994).
• John H. Langbein, The Uniform Prudent Investor Act and the Future of Trust Investing, 81 Iowa L. Rev. 641 (1996).
• Restatement (Third) of Trusts, Reporter's Notes to §§ 80 and 90.
• ACTEC Commentaries on Delegation and the Prudent Investor Rule (current edition).